‘Flattening’ tax evasion?: Evidence from the post‐communist natural experiment

Randall Filer, Jan Hanousek, Tomáš Lichard and Karine Torosyan

The Economics of Transition, 2019, vol. 27, issue 1, 223-246

Abstract: We analyze the response of tax evasion to the introduction of a flat tax in several transition economies. Using a novel estimator based on household level data, we show that in most of the countries studied there was no discernible effect on the measured size of unreported income following a flat tax reform. This may imply that decreases in marginal tax rates may frequently have been accompanied by a parallel deterioration in attitudes towards public services and the government in general. The countries that show a response to the flat tax reform appear to be those where satisfaction with government services increased.

Date: 2019
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